Daily Stock Pick for August 4, 2023

With the markets continuing to pull back and a (hopefully) relaxing weekend ahead of us, let’s end the week with yet another high-yielding dividend stock – this time, one with a dividend yield touching 8%.

Now, in terms of capital gains, this stock has seen its share price dip over the past year, which has no doubt contributed to its high yield.

If this is a stock you would solely buy for dividend income, that would be a warning sign.

In this case, however, it actually could create future upside – as the price decline points to the company now being significantly undervalued.

And now could be the perfect entry point into this dividend player with a solid 23-year track record – especially because some recent big news could create some near-term price volatility.

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TC Energy Corporation (TRP)

Based out of Canada, TC Energy is one of North America’s biggest energy infrastructure players, with a huge natural gas pipeline network plus a sizeable liquids pipeline (crude oil transportation) business.

Recently, TC Energy announced plans to spin off its liquids pipeline business into its own new company. Shares of the company declined as a result – likely due to investors’ uncertainty surrounding whether the new smaller entity would be able to maintain the same consistent dividend payouts as before.

This should not affect the company’s dividend paying ability. 

One, its dividend payout ratio has been historically low, at under 50%. 

Second, the growth of the remaining natural gas pipelines business is actually higher than the liquids business – meaning the remaining entity should have  a faster growth rate. 

And third, the spinoff will actually make the business less cyclical as it eliminates exposure to the crude oil markets.

As such, the company believes its track record of consistently increasing dividend payouts – one it has maintained for the past 23 years – will continue.

And with the share price significantly down over the past year – now may be a perfect time to get in on this dividend player.

To your wealth,
Felix @ Ace of Investing